Construction spending in September posted its best month on record as the value of residential projects by private builders also reached a monthly high, underscoring the role the red-hot housing market played in the economy’s strong performance last quarter.
The Commerce Department reported Monday that the total value of building projects under way came in at a seasonally adjusted annual rate of $910.6 billion in September, representing a 1.3 percent jump from the previous month. The $910.6 billion level was an all-time monthly high and the 1.3 percent increase exceeded analysts’ expectations for a more modest advance of around 0.4 percent.
Spending by private builders on housing projects rose by 1.4 percent in September to a rate of $471.4 billion, the highest monthly level on record.
The housing market has been one of the economy’s important sources of strength.
Amid signs that the economy is picking up steam, the Federal Reserve last week decided to hold a key short-term interest rate at a 45-year low of 1 percent and suggested that it could stay there for some time. Keeping rates at such super-low levels may motivate consumers and businesses to spend and invest more, boosting economic growth.
The economy grew at a breakneck 7.2 percent annual rate in the third quarter — the best showing since early 1984. Brisk investment in residential projects — powered by low short-term rates as well as low longer-term mortgage rates — contributed to the economy’s strong performance.
Although the economy and housing activity are expected to slow in the current quarter— home sales are expected to reach record highs for all of 2003.
The economy is expected to grow at a rate of 4 percent in the current quarter, economists say.
In Monday’s construction report, the value of all construction by private builders — both residential and commercial — rose by 1.7 percent in September to a rate of $690.6 billion, the best month on record.
Spending on hotels and motels, office buildings, factories and power plants were among the categories showing gains. Spending, however, was trimmed on transportation and communications projects by private builders.
Spending by the government on big public works projects, meanwhile, was flat at $220 billion in September. Higher spending on highways and streets and power plants was blunted by lower spending on housing, health care buildings and public safety facilities.